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The macroeconomic effects of banking crises: evidence from the United Kingdom, 1750–1938

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  • Kenny, Seán
  • Lennard, Jason
  • Turner, John D.

Abstract

This paper analyses the macroeconomic effects of banking crises in the United Kingdom between 1750 and 1938. We construct a new annual chronology of banking crises, which we define as episodes of runs and panics combined with significant, geographically-dispersed failures and suspensions. Using a vector autoregression, we find that banking crises are associated with short, sharp and significant drops in economic growth. Using the narrative record to identify plausibly exogenous variation, we show that this finding is robust to potential endogeneity.

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  • Kenny, Seán & Lennard, Jason & Turner, John D., 2021. "The macroeconomic effects of banking crises: evidence from the United Kingdom, 1750–1938," LSE Research Online Documents on Economics 106585, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:106585
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    Citations

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    Cited by:

    1. Kenny, Seán & Turner, John D., 2018. "Wildcat Bankers or Political Failure? The Irish Financial Pantomime, 1797-1826," Lund Papers in Economic History 176, Lund University, Department of Economic History.
    2. Braggion, Fabio & Dwarkasing, Narly & Moore, Lyndon, 2022. "Value creating mergers: British bank consolidation, 1885–1925," Explorations in Economic History, Elsevier, vol. 83(C).
    3. Bodunrin, Olalekan Samuel, 2023. "The cause and Interaction between banking crises and the business cycle," MPRA Paper 117955, University Library of Munich, Germany.
    4. Schneider, Benjamin & Vipond, Hillary, 2023. "The past and future of work: how history can inform the age of automation," Economic History Working Papers 119282, London School of Economics and Political Science, Department of Economic History.
    5. Kenny, Seán & Ögren, Anders & Zhao, Liang, 2023. "The Highs and the Lows: Bank failures in Sweden through inflation and deflation, 1914-1926," Lund Papers in Economic History 246, Lund University, Department of Economic History.
    6. Jason Lennard, 2020. "Uncertainty and the Great Slump," Economic History Review, Economic History Society, vol. 73(3), pages 844-867, August.
    7. Kenny, Seán & Lennard, Jason & Turner, John D., 2021. "The macroeconomic effects of banking crises: Evidence from the United Kingdom, 1750–1938," Explorations in Economic History, Elsevier, vol. 79(C).
    8. Kenny, Seán & Turner, John D., 2018. "Wildcat bankers or political failure? The Irish financial pantomime, 1797-1826," QUCEH Working Paper Series 2018-07, Queen's University Belfast, Queen's University Centre for Economic History.
    9. Kenny, Sean & Ögren, Anders & Zhao, Liang, 2023. "The highs and the lows: Bank failures in Sweden through inflation and deflation, 1914-1926," QUCEH Working Paper Series 23-03, Queen's University Belfast, Queen's University Centre for Economic History.

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    More about this item

    Keywords

    banking crisis; macroeconomy; narrative identification; United Kingdom; vector autoregression;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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